BNY Mellon To Resume Stock Buybacks; Shares Rise 5%

BNY Mellon, on Friday, announced the potential resumption of its share buybacks from the Q1 of 2021 and said that it expects to maintain its stock dividend following the US Federal Reserve’s bank stress test results. Shares rose 5.1% in after-hours trading.

BNY Mellon (BK) stated that the restriction on the buybacks applicable to the investment banking services holding company during Q3 and Q4 of fiscal 2020, will be revised for the Q1 of fiscal 2021.

The Fed’s decision was backed by the resiliency and strength shown by BNY Mellon business model and capital position in times of stress, the company stated. As of Sept. 30, BNY Mellon had $38.6 trillion in assets under custody and administration, and $2 trillion in assets under management.

“We are pleased to announce our intention to resume our common share buyback program. With these modifications, we expect to maintain strong capital ratios while also delivering an attractive capital return back to our shareholders.” said BNY Mellon CEO Todd Gibbons.

The stock price has lost 19% year-to-date and is trading at a discount of 21% to its 52-week high. (See BK stock analysis on TipRanks)

Last week, Deutsche Bank analyst Brian Bedell raised the stock’s price target from $46 to $51 and reiterated a Buy rating. The new PT implies that investors could be reaping a 25% gain over the coming 12 months.

Bedell noted, that rising long-term bond yields, continued appreciation of equity markets and continued elevated trading volumes favored stocks that have been the most hampered by low interest rates in the downturn earlier this year, along with “high quality companies levered to improving markets.”

From the rest of the Street, the stock scores a cautiously optimistic consensus of a Moderate Buy based on 4 Buys, 5 Holds, and 1 Sell. The average price target of $45.11 implies upside potential of 10.6% to current levels.